Of the policy questions related to the incoming Trump Administration, one of the most compelling is whether the new President will revive Section 301 of the Trade Act of 1974 as a major component of U.S. trade policy. Mr. Trump’s call to “direct all appropriate agencies to use every tool under American and international law . . . including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974” suggests that he might. But can the new Administration take unilateral action under Section 301 without violating U.S. law or U.S. commitments under the World Trade Organization (“WTO”) Agreements?
Section 301 was one of the key levers in U.S. trade policy before the creation of the WTO, particularly with respect to Japanese practices that U.S. companies and the U.S. government believed were anticompetitive and discriminatory. It has remained largely dormant since then, except for the occasional petition resulting in a new WTO case.
Section 301 includes both mandatory and discretionary components. Mandatory action requires violation of a trade agreement, but the discretionary component does not. Rather, it allows the U.S. government to take action if a foreign government practice is unreasonable or discriminatory and burdens or restricts U.S. commerce. Section 301, moreover, only requires resorting to dispute resolution under trade agreements if the issue is covered by a trade agreement. A WTO panel has also explained that
The statutory language . . . gives the USTR the broad discretion we outlined above as regards the entire scope of U.S. trade relations, only a part of which comes within the orbit of WTO obligations. Within the discretion allowed, the statutory language leaves it to the USTR to apply the provisions of the Trade Act which relate to the entire gamut of U.S. trade relations in a manner which is consistent with U.S. interests and obligations.
The answer, then, appears to be yes – the new Administration could bring back unilateral U.S. action under Section 301, without violating either U.S. law or WTO rules, but only for a limited subset of issues that are not covered by the WTO Agreements. Reviving Section 301 would be controversial, but if a truly harmful trade policy cannot be addressed through dispute resolution, the use of Section 301 may actually result in freer trade and expanded opportunities for U.S. firms, and not the trade apocalypse that some foresee.